Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.
Writing for the New York Times, Paul Krugman has a new column promoting more government spending and additional government regulation. That’s a dog-bites-man revelation and hardly noteworthy, of course, but in this case he takes a swipe at the Cato Institute.
The financial crisis of 2008 and its painful aftermath…were a huge slap in the face for free-market fundamentalists. …analysts at right-wing think tanks like…the Cato Institute…insisted that deregulated financial markets were doing just fine, and dismissed warnings about a housing bubble as liberal whining. Then the nonexistent bubble burst, and the financial system proved dangerously fragile; only huge government bailouts prevented a total collapse.
Upon reading this, my first reaction was a perverse form of admiration. After all, Krugman explicitly advocated for a housing bubble back in 2002, so it takes a lot of chutzpah to attack other people for the consequences of that bubble.
But let’s set that aside and examine the accusation that folks at Cato had a Pollyanna view of monetary and regulatory policy. In other words, did Cato think that “deregulated markets were doing just fine”?
On Thursday, the Heritage Foundation and the Wall Street Journal released the 2012 Index of Economic Freedom, an annual report on economic freedom across the globe that measures interventionist government policies and ranks countries accordingly.
Ed Feulner, president of the Heritage Foundation, gives us an idea of what we’ll find in this year’s report, and it’s not pretty:
As Friedrich A. Hayek foresaw decades ago, “The guiding principle in any attempt to create a world of free men must be this: a policy of freedom for the individual is the only truly progressive policy.” Thus, the battle of ideas must also be a battle for the meaning of the very words with which we debate. Is it “progressive” to utilize the coercive power of the state to redistribute and level incomes within a society? Is it “liberal” to build a massive state apparatus to regulate conditions of employment, usage of energy, and access to capital? The answers to such questions will determine how we live as individuals in the 21st century.
The 2012 Index of Economic Freedom documents a global economy that is engaged in this evolving battle between the forces of government and free markets. Today’s troubles have been neither accidental nor inevitable. The problems we face are the outcomes of politically driven and economically self-defeating policy decisions that have turned an economic slowdown into an accelerating decline.
Unfortunately, the report shows that the United States has, once again, lost more economic freedoms as corruption, cronyism, government spending, and a poor monetary policy continue to drag us down. While we are still ranked as “mostly free,” we can no longer say our economy is the ambition of the world.
Sometimes I see things that I just can’t believe are true. This is one of those times.
Earlier this year, the Louisiana legislature almost unanimously passed a law that prohibits the use of cash in secondhand transactions.
The story on this one is that the law is intended to create a paper trail when people steal things like copper or other materials from a construction site. Forcing a check, money order, or electronic payment would make it easier for law enforcement to find a thief. I understand that argument, but there are some real problems with this law.
U.S. currency is valid for all transactions. On the front of our currency is the line “This note is legal tender for all debts, public and private.” Prohibiting the use of legal tender is a bit of an oxymoron.
Records of each transaction must be kept for 3 years. When you hear people like me fussing about unnecessary government regulations hindering businesses, this is the type of thing we’re talking about. This law requires businesses to keep very specific records for each second hand transaction so that law enforcement can find people they suspect are thieves.
The information to be collected by the dealer includes: date, location of purchase, name and address of seller, driver’s license or passport number of seller, license plate of vehicle used to deliver the goods, a full description of all materials being purchased.
Since 1993, CNN has regularly asked a pair of questions that touch on libertarian views of the economy and society:
Some people think the government is trying to do too many things that should be left to individuals and businesses. Others think that government should do more to solve our country’s problems. Which comes closer to your own view?
Some people think the government should promote traditional values in our society. Others think the government should not favor any particular set of values. Which comes closer to your own view?
A libertarian, someone who believes that the government is best when it governs least, would typically choose the first view in the first question and the second view in the second.
[I]n CNN’s latest version of the poll, conducted earlier this month, the libertarian response to both questions reached all-time highs. Some 63 percent of respondents said government was doing too much — up from 61 percent in 2010 and 52 percent in 2008 — while 50 percent said government should not favor any particular set of values, up from 44 percent in 2010 and 41 percent in 2008. (It was the first time that answer won a plurality in CNN’s poll.)
Thomas Sowell, a renowned free market economist and author, recently talked about his new book, Intellectuals and Race, in an appearance on Fox News. During the interview, Sowell, who is an African-American, told Tucker Carlson that minimum wage laws have hurt black workers:
In an appearance on Fox News Channel’s “Hannity” with fill-in host and Daily Caller editor in chief Tucker Carlson, author Thomas Sowell argued that the federal minimum wage law has been used to undermine companies that employ blacks.
In the fourth quarter of 2012, the black unemployment rate was more than double the rate for whites. But prior to the 1930s, Sowell said, black unemployment was actually lower than white unemployment.
“What changed was the government intervention into the labor market,” Sowell said. “1930 was the last year in which there was no federal minimum wage. They brought in the Davis Bacon Act.”
Mort Zuckerman one of the top 200 richest men in the world and current editor of U.S. News and World Report has been painted by some conservatives as a liberal that has seen the light”. But has he?
In it he lambasted our current president’s economic policies and labels them a “failure.” I agree with Mort on this point. Mort, like a lot of conservatives and every liberal, does not get to the heart of what has been going wrong in the halls of Congress, in the Oval Office or the chambers of the Supreme Court for the last 100 years. What Mort fails to realize is that the collectivist central planning of our economy and governing of Individual behavior by all the previous administrations, along with the monopoly of the money supply and the setting of interest rates by the Federal Reserve and the endless wars overseas has led us to the where we are today.
Mort’s failure to see that the collectivist ideology that underpins the entire U.S. government budget is the ONLY REASON for the “Great Recession” that most of us are endruing today. (Around Washington D.C. there is no recession.) Instead of advocating for less central planning and control by politicians and bureaucrats over the lives and wallets of individuals he advocates for more. Instead of advocating for more individual liberty, he advocates for more government intervention.
Here’s your “no sh*t” moment of the day. The TARP “watchdog” says that the bailouts have made “too big to fail” part of public policy:
The watchdog for the Troubled Asset Relief Program (TARP) issued its final verdict on the bailouts Wednesday in a mixed report that credited the program with stabilizing the economy but warned that a “too big to fail” mentality might persist.
But the group noted that the extraordinary intervention might have ingrained a “too big to fail” mentality in the financial markets, and perhaps in corporate America.
“By protecting very large banks from insolvency and collapse, the TARP also created moral hazard: Very large financial institutions may now rationally decide to take inflated risks because they expect that, if their gamble fails, taxpayers will bear the loss,” the report stated, adding that government efforts to save domestic auto manufacturers might have spread that hazard to non-financial institutions as well.
“The implication being that any company in America can receive a government backstop, so long as its collapse would cost enough jobs or deal enough economic damage,” the report stated.
Of course, they also claim the bailout was crucil to ensuring stability. Well, when you’re giving out taxpayer money to institutions that made poor decisions and would have otherwise failed, I’m sure they were relieved. But when the next economic troubles happen - whether it’s financial institutions or an auto industry producing cars no one wants, bailouts will be the policy of whatever administration is in power and Congress.
Few things in life confound me more than the propensity of the political left to put unbridled faith in the government’s ability to make wise decisions for us all, while simultaneously treating purveyors of goods and services on the free market as if they were shady characters lurking in some beer bottle strewn, garbage littered back alley, just waiting to take advantage of the unsuspecting traveler lost and wandering into the wrong side of town.
In the free market, those who provide goods and services must do so (theoretically, at least…pretending big business and big government don’t collude to rig the market to the advantage of those willing to pay) by providing those goods or services with a level of quality superior to those of their competitors at a given price point. And because businesses are subject to the profit motive, they must constantly work to become more efficient and innovative than their competitors. If they fail to do so, they lose market share, which means they lose money, which means they go out of business. Many companies that were once king of the hill have fallen by the wayside, victims to more innovative upstarts. Remember Eastern Airlines, Atari video games, American Motor Company, Rich’s, Datsun, Woolworth’s, KB Toys and Enron? All were once major players in their markets, and all are now nowhere to be found.
The process of “creative destruction”, by which the existing economic order is constantly churned by the very nature of free market dynamics, is what drives the rapid advances in technology and efficiency. Oddly enough, the concept of creative destruction finds its roots in Marxist economic theory, tracing back to Karl Marx’s The Communist Manifesto and later Das Kapital. Of course, Marx saw the concept as negative, preferring the economy to be managed by a powerful central government directing the lives of its citizens by force.
The in-depth poll found Americans not only rejecting the idea of an activist government, but a growing number urging that its power be curtailed. The findings reinforce the anti-big government message of tea party rallies and suggest anew that incumbents, particularly Democrats, face a strong headwind in this fall’s elections for control of Congress.
“By almost every conceivable measure, Americans are less positive and more critical of government these days,” said the report from the non-partisan Pew Research Center.
The center said its new survey found “a perfect storm of conditions associated with distrust of government - a dismal economy, an unhappy public, bitter partisan-based backlash and epic discontent with Congress and elected officials.”
A key finding: Americans oppose greater government control over the economy by a margin of 51-40 percent.
That’s a reversal from just a year ago, when they supported greater government control by a margin of 54-37 percent.
Unfortunately, Washington is oblivious to the reasons why.